ISLAMABAD: Finance Minister Ishaq Dar has stated that the budget deficit is manageable but the external account deficit needs to be managed; otherwise, the country will be “blackmailed”.
Addressing a press conference on Friday in response to the ongoing debate in the mainstream and social media, the finance minister said that “we have been spending more than what the country could afford and consequently, the country is facing the foreign exchange problem.”
He said that he would not resign and no one should dictate him through talk shows as he is trying to fulfil the responsibility assigned to him by the Pakistan Democratic Movement (PDM).
On back of loan from China, SBP-held foreign exchange reserves increase $556mn, now stand at $3.81bn
The finance minister came down hard on the former prime minister Imran Khan and accused him of the current economic situation and stated that he should refrain from talking that the country is about to default, “neither the country is bankrupt nor will it be”.
He said that neither there is a need for a financial emergency nor any plan is under consideration.
He; however, agreed to the formation of a commission of independent experts to determine who is responsible for the current economic situation.
He said that prior actions of the IMF have been fulfilled.
He; however, did not respond to the question as to how much debt was increased, following the depreciation of the rupee during the present government’s tenure, and what had stopped them from undoing electricity and petrol prices by Rs5 per unit and petrol Rs10 per litre, respectively, after coming to power in April 2022, which were announced by the previous government by end of February 2022.
The finance minister also did not respond to why the PDM did not reverse the PTI government’s decision to reduce the petrol and electricity prices, especially since they had termed the PTI government’s move a “political gimmick” and a financially unviable “deviation” from the terms and conditions agreed with the IMF.
Dar said that the former prime minister’s attitude is “very selfish” about national issues and has always been stating the country is about to default. The finance minister said that there are no two opinions that the country is passing through a difficult economic situation but it will not default. He said that the external situation was further compounded by the floods as the government has to import pulses, wheat, and fertiliser for which a few billion dollars have been spent.
He said that the fiscal deficit was left at 7.9 per cent, the current account deficit at 4.6 percent of the GDP, and the trade deficit was $39 billion.
Likewise, he said that average GDP growth was 3.7 percent and during their period, the GDP growth was $26 billion comparable to $112 billion during the PML-N tenure of five years.
He said that the per capita income was increased just by $30 during the four years of the PTI government, adding that inflation in the country was due to the global increase in commodity prices and inflation during July-February 26.2 percent and core inflation is 19 percent. The government to protect the low-income group has increased the BISP allocation to Rs40 billion.
He added that at present, the SBP has foreign exchange reserves of $3.2 billion while commercial banks have foreign exchange reserves of $ 5.44 billion. He said that foreign exchange reserves would increase further.
He said that China has shown friendship. He acknowledged that exports during the previous tenure of the PML-N were stagnant and stated of course there has been a decrease in imports and exports during the current PDM tenure.
The finance minister said that the present government have made foreign payments of about $6.5 billion, of which, $2 billion to Chinese banks and $3.5 billion to the UAE and Swiss banks. He said that all the formalities with the Industrial and Commercial Bank of China (ICBC) have been completed as of Thursday night and $1.3 billion repaid to them are now being rolled over to Pakistan.
Dar said that the circular debt was increased by the previous government to Rs1,465 billion from Rs1,148 billion during the last four years and gas circular debt has been increased to Rs1,700 billion.
Dr said that Imran-led government has increased the total public debt and liabilities Rs30 trillion to Rs54 trillion and government debt from Rs25 trillion to Rs49 trillion till June 2022.
In reply to a question about the devaluation of the rupee and the increase in the interest rate, Dar questioned who had separated the monetary policy by making changes in the law, as well as, created a new system by making changes in the institutions.
The minister said that the Ministry of Finance is responsible for the fiscal side and supplementary budget not because of taxes, but due to energy sector debt.
The finance minister also showed displeasure over his predecessor finance minister Miftah Ismail for making a statement on television about economic policy, and stated that there is an economic policy and a road map with the present government but it cannot be advertised in the newspaper.
The finance minister said that he would steer the country out of the economic quagmire soon and expressed the hope that the SBP reserves would increase to $10 billion and national reserves to $16 billion by June 30, 2023.
He said that where wheat and fertilizer used to be smuggled out of the country, now dollars are being smuggled and he is mulling over a policy to deal with it.
He said that the budget deficit is manageable but the external account has to be managed; otherwise, the country would be “blackmailed”. He said that the country has been spending, which it could not afford.
He said that those who had brought Imran Khan to power and later stated that if he remained in power the country’s survival would have been at stake.
Dar said that the financing gap, he believes is $5-6 billion instead of $7-8 billion.
Copyright Business Recorder, 2023
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